Leaving the European Union

Debate between Siobhain McDonagh and John Redwood

Monday 11th March 2019 Westminster Hall

[David Linden]

That is absolutely on the record. The right hon. Gentleman’s declaration of financial interests shows that he does give advice for financial planning. Indeed, that was pointed out by the hon. Member for Gravesham (Adam Holloway). I said on the record what is already in the public domain about advice that has been given by the right hon. Member for Wokingham, and I stand by those comments.

[John Redwood]

Ms McDonagh, I think what was at issue was the accuracy of the statement. The hon. Gentleman said that I have urged people to take their money out of Britain because of Brexit. I have never said that, it is completely false, and I wish it to be withdrawn.

[Siobhain McDonagh (in the Chair)]

Does the hon. Member for Glasgow East wish to withdraw his comments? The right hon. Member for Wokingham has not, in his view, advised people to take their money out of Britain because of Brexit.

Housing Supply

Debate between Siobhain McDonagh and John Redwood

Thursday 13th July 2017 Westminster Hall

[John Redwood]

I very much agree, and I will go on to look at how we deal with that, at the Government’s answer and at what more can be done. The hon. Lady is absolutely right that the figures exaggerate the homeowner percentage. Given the way the figures are calculated, if a group of young adults co-rent and share a property, for example, that does not appear as a series of independent rented households, but as one rented property. The figures therefore understate the number of people living in the rented model compared with those living in the owner-occupied model, because it is measured by housing units rather than individual households. The Government should bear it in mind that we are probably dealing with more people whose aspirations are not being fulfilled, rather than fewer, because the overall 64% figure undoubtedly overstates the reality.

We all know from our own experiences that many under-35s not only cannot afford to own a home, but find it extremely difficult to afford a rented home in London and the south-east because rents are extraordinarily high. They may still live with their parents, but it would not be their preferred way of proceeding; it may not be their parents’ preferred answer either, but family loyalty and love come before individual preferences, given the financial positions people find themselves in.

That decline in official home ownership—from 71% to 64%—is more pronounced when looking at the age-related figures. According to the official figures, 54% of under-34s owned their own house or flat in 1996, but that fell to just 34% by 2016. We have gone from a majority of the under-34s being able to afford their own home—so we know it can be done—to a minority of around a third in the more recent figures.

For most people, the financial case for owning is extremely strong. By definition, at the moment it may be cheaper to buy a house and pay a mortgage at very low interest rates than to pay rent, because rents are so high. Looking at it over a lifetime, it is obviously much cheaper and better to make the effort and buy a house, if people can, because they may have only 25 years of paying the mortgage, whereas they may have 50 or 60 years of paying rent, which will cost an awful lot more. Rent is a good way to keep people poor.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

To give the right hon. Gentleman a picture, in my office in Portcullis House, I have Ross, who bought his own home and pays a mortgage of £600 a month, and Dan, who pays £650 a month to rent a room in a flat. For the first it is an investment; for the second it is an impediment to ever owning his own home.

[John Redwood]

That is a very powerful individual illustration that bears out my general point that maybe half of people today would be no worse off month by month if they were able to get a deposit and buy a property, compared with renting. If we look forward 30, 40 or 50 years, they should be massively better off, if for no other reason than that the mortgage stops once it has been repaid, whereas rent carries on.

Worse still is the cruelty of renting for those in old age, when the rent will be at its maximum, because rents are likely to carry on inflating as they have done in recent years. Not only is rent paid for many more years, but people are charged the maximum rent when they are deep into retirement and least able to pay it, and when they will worry about how far their pension will stretch to meet their daily bills. That leaves out of account the possibility that, if someone buys a property, its value will go up, which is an added bonus. As I pointed out, that has been true since 1980. It might not always be true, but if it were true again over 25 years, the owner would be the double winner: they pay less by purchasing rather than renting, and their asset rises in value.

That rise in value gives homeowners more freedoms. If they buy early enough in life, that asset is there, normally rising in value, as possible collateral if they want to raise a loan for some other purpose—to help their family set up a business or whatever it may be—but it is not there for the person in rented accommodation. It is undoubtedly true that a person who manages to buy a property is, rightly or wrongly, usually treated as a better proposition for loans and business activities, which is another injustice for the person continuously paying rent.

I detect some cross-party agreement, which is excellent, that home ownership is the preferred form of tenure for many people—for very good reason—and that we need to make more efforts to get people into it, to deal with their high rental costs.

[Siobhain McDonagh]

Does the right hon. Gentleman agree that the other advantage of owner-occupation is security? In the private rented sector, where an increasing number of families with children are living, a landlord simply needs to secure a possession order for eviction. That has become the main route for the eviction of families, leading to children being insecure and living in temporary accommodation, far away from their homes and schools, with all the consequences that holds for public services.

[John Redwood]

I entirely agree, and I mentioned security for families at the beginning. That is a point well made.

We need to ask what we can do. House prices in many parts of the country, most especially in London and the south-east, are extremely high, and it is very difficult even for someone on average earnings, let alone below-average earnings, to raise a sufficiently large deposit, meet the requirements to raise the loan and meet the interest payments on it. One driver of these very high house prices is undoubtedly the big imbalance between demand and supply in housing. I know the Government accept that and are trying to work on the supply side. If more houses can be produced, all other things beings equal, that should help ease the house price pressures.

There is also the question of demand. I think all of us wish to be generous to refugees and to invite in people of talent who can make a good contribution to our community. There is everything to be said for allowing companies investing here to bring in their executives and so forth, but Government Members feel there has to be some control on overall numbers. When we are being generous, as we should be, we have to take into account the strains being put on the housing market, which may mean that the people coming here cannot get the quality and price of housing that we would regard as important for the lifestyles we wish for all the people in our country.

We need to look at the number of people who need housing vis-à-vis migration, as well as supply. I know the Government are considering that and will be freer on it in due course, once we come to debate in the House of Commons a UK migration policy that meets demands for decency and labour mobility for business, but that also understands the stresses placed on housing and other services if we have very large numbers. Those stresses run the risk of us not being able to offer people the standards we think are appropriate for anyone settled here in our country.

The Government have attempted to tackle the housing problem by driving the construction of more homes and to tackle the issue of affordability by working particularly with first-time buyers on how to get the first deposit and raise sufficient money to buy what are expensive properties. I welcome the Government’s initiatives. They are all well-intended, and some have been doing good things. My main purpose today is to raise two questions. Can the initiatives that already exist be beefed up and better advertised, so that we get more people to use them? It is still slower than we would like. Secondly, are there new initiatives we should add to them, given the general imperative to get on with solving the housing scarcity problem in general and the shortage of affordable housing to buy in particular?

Through the help to buy ISA, the Government are offering a £3,000 top-up to someone who can save £12,000 for a deposit on a house. Although £15,000 is a lot of money for someone on a low income who is trying to save, it is not a lot of money for a house deposit. I wonder whether, through the Minister, the Chancellor might think a little more about those figures. The more help that can be offered, the faster someone can get a deposit and the better that is for their ability to access the housing market.

The Help to Buy equity loan scheme is admirable, but it is limited to new homes only, and I wonder why. Most people buy a second-hand home. By definition, the stock of those homes is massively bigger than the new supply in any given year. I know it would be a lot more expensive if we opened up the scheme to a wider range of houses, but it would also be a lot more useful, because many people buy a second-hand home as their first home. Indeed, for some, the pleasure of buying a first home is in buying a second-hand home that is not in great shape, so that they can put their stamp on it. It may be a way to have a more affordable home, because they may wish to spend their own time and effort on improving the house, rather than spending money to get others in to improve it for them. It might be worth looking at whether we can provide more of a bridge for people who want to buy second-hand homes.

The affordable housing fund was set up to generate more construction of affordable housing. Again, that is a great initiative. I would like the Minister to give us more up-to-date information on how many homes that scheme might achieve and what the approved build rate under it is. One issue with the affordable housing fund is the cost of building the properties and the quality of their construction. I am all in favour of really good-quality construction, and modern homes are built to a much higher standard in many ways than older homes. However, one way to match the need for higher quality and affordable cost may well be to build on the initiatives of the house building industry, by having more construction in the factory before things are brought to site. None of us wish to recreate the old prefabs. They were a necessary and welcome development in the immediate post-war crisis, when so much of our cities had been devastated by bombing, but they are not the kind of thing we want to build today. People want elegant, well-insulated homes that meet all modern standards.